Amazon HQ2. Where does it end up?

bmw88rider said:

It's an interesting situation for both NYC and Amazon. One of the things that is always off is the expected economic benefits that these incentive packages always list. Most of them never actually come true. They are usually a pie in the sky proposal that looks great on paper but long term never comes true. 

 

I'll use my company Dell as an example. While we have been a long time staple in the Austin tech scene, We only met the projections for the total HC in the region twice in 25 years that we outlined in the overall tax benefit proposal when we built the campuses. Now we just a little over half of what our highest ever HC has been in Austin area.   We have sold off building after building in the area and now are half the overall real estate holding too. 

 

If there was a payback clause or a performance clause in the contract it would be a different story. I don't ever see any of those details brought up when they are discussing the contracts publicly. It would be an entirely different story if Amazon was penalized for missing HC and salary goals. Of course I don't think any company would accept a proposal like that. 

Agree, but how do you measure all the other smaller companies that started up in Austin because of the talent/suppliers/products/infrastructure/etc Dell brought into the area? This just gets really hard to quantify really fast. 

Robbie said:

bmw88rider said:

It's an interesting situation for both NYC and Amazon. One of the things that is always off is the expected economic benefits that these incentive packages always list. Most of them never actually come true. They are usually a pie in the sky proposal that looks great on paper but long term never comes true. 

 

I'll use my company Dell as an example. While we have been a long time staple in the Austin tech scene, We only met the projections for the total HC in the region twice in 25 years that we outlined in the overall tax benefit proposal when we built the campuses. Now we just a little over half of what our highest ever HC has been in Austin area.   We have sold off building after building in the area and now are half the overall real estate holding too. 

 

If there was a payback clause or a performance clause in the contract it would be a different story. I don't ever see any of those details brought up when they are discussing the contracts publicly. It would be an entirely different story if Amazon was penalized for missing HC and salary goals. Of course I don't think any company would accept a proposal like that. 

Agree, but how do you measure all the other smaller companies that started up in Austin because of the talent/suppliers/products/infrastructure/etc Dell brought into the area? This just gets really hard to quantify really fast. 

Yeah. And for a company like Dell, are they including their contracted external employees? 

I used to live in Bloomington, Illinois, where I worked  for State Farm at their HQ. My best friend worked for a tech company that did work exclusively with State Farm. My other friend worked for a temp agency (for 3 years), but he worked AT State Farm. Then there is an Actuarial consultant firm based out of there, with.... 500? employees. And the consultants that are there pretty much full time from KPMG. And the hockey rink that I also worked at, probably 90% of the patrons were either employees of SF, or else they worked for a company that was only around BECAUSE of State Farm--the hockey rink had another 50 or so employees (admittedly most were part time). 

Maybe my point here is that it makes no sense for any of the towns to make any concessions to Amazon unless they're a small town, meaning less than (relatively random numbers here) 50,000 in a 50 mile radius. A town like New York or Chicago may get a few more fast food restaurants close to the HQ, but that'd be about it. A town like Ames, IA or Walla Walla, WA, it'd be a big deal. 

EDIT: Was I on drugs when I first posted this? Wow, I messed that up bad.  Fixored now.

Totally agree it is hard to quantify. Freescale, Motorola, Applied Materials, AMD all were there too.  What does UT contribute? Would Apple have built there if there wasn't a large Ex Dell contingent already there who BTW is on a path to surpass a lot of people and become the 3rd largest employer in the area? I mean there is a lot of factors.   

At the end of the day, I'm just not a fan of these big corporate handouts. If they want to do that then spend $3B updating the infrastructure to allow those additional people to get to work. Build out the better electrical grids to support growth. and so on and so on. How much will that cost to do? I bet a lot more than the taxes they bring in. There are just too many cases out there where it's near sighted growth to get a re-election vs the reality of the declining quality of life to be considered. 

Bravo NYC. I think you have done just fine. 

bmw88rider said:

If there was a payback clause or a performance clause in the contract it would be a different story. I don't ever see any of those details brought up when they are discussing the contracts publicly. It would be an entirely different story if Amazon was penalized for missing HC and salary goals. Of course I don't think any company would accept a proposal like that. 

Some of them do, for sure. Here in Columbus, OH, we've had a stream of concessions handed out to companies for moving, staying, or expanding here. But we've also had a steady stream of clawbacks for unearned incentives. They don't get as much press, but they do happen regularly. I know some places don't enforce them but we sure as hell do.

Also, a lot of incentives are credits for or refunds on employment taxes, which wouldn't ever come up if the company doesn't actually meet their projections.

Not to say that handouts to "tempt" companies to do expansions they probably would have done anyway are a good idea, not at all. But right now it's the game everyone plays. I wish they wouldn't.

Sure you could spend money on infrastructure first. Like China with its empty cities. I think Venezuela started one. Brazil dabbled with one. The irony is that a behemoth technocratic company still had to go where the people already are only to get a 'Bronx cheer' from a political neophyte. Please please bring all 50,000 openings to DC.  New York is a train ride away and I'm sure is adorable in the spring with its admittedly superior restaurant scene. 

Maybe they should funnel some of the $420 edit, million in transferrable tax credits the film industry gets from NY State each year to western Queens especially if the remake of ' Coming to America ' is for real. Great movie. Hope the remake doesn't suck. 

In reply to dculberson :

I think they've got more than enough tax incentives already. $11 billion in income and paid NEGATIVE $137 million in taxes last year.

With numbers like that, they should be paying the states to let them build an hq there, not the other way around. 

I usually don’t agree with my progressive neighbors here but too much of this Amazon deal bothered me.  Because of both the state’s and the city’s long history of corrupt leadership there are a number of boards that need to approve deals like this. This forces all the details to be public and makes it harder for people to get their pockets lined.  All those steps were bypassed.  Hearings were held in the city council to try and find out what we were agreeing to and in exchange for what was guessed to be about $3 billion in city and state spending all the Amazon people could say was up to 25,000 jobs and if it would shut the council up they’d give the people in the neighboring housing projects first crack at jobs in the campus.  

In the past couple years several of the Governor’s close advisors have been locked up for similar deals in other parts of the state and the mayor has been investigated for getting kickbacks from real estate investors.  Given their records everyone wanted more transparency.  If this was such a great deal it should have had no issue passing through the necessary channels.  Since Bezos said he’d rather kill the deal than risk the details getting out it seems like there’s something to hide.  $3 Billion is a lot of money, especially at a time when other businesses are building here with no incentives.  This price tag also didn’t seem to include the infrastructure upgrades that the area’s 100+ year old utilities will most definitely need.  Someone will be happy to throw money at Amazon but I’m happy it won’t be my money. 

In reply to dculberson :

Good for Columbus to do that. It protects the city and keeps the companies honest. 

I agree on the games being played. I wish it would stop too but I think we already slide way far down that slippery slope. 

In reply to Wally :

Ad Tedium; FoxNewsAlert. 

Last refuge.

But it seems NY,NY can let go of its Tammany Hall hang up. Chicago, Il takes the cake when it comes to corruption. But holy cow does the District of Corruption out do everybody per capita. 

I watched the Walmart shakedown with disgust but it got done. Whilst I have Prime/Whole Foods and love TJs cream yogurts WM is where I shop. So thank you corrupt politicos.